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By Glenn Somerville and Kim Dixon

WASHINGTON, Aug 4 (Reuters) – The Bush executive department ‘s ‘misguided’ policies are to blame for huge U.S. financial deficits and tax cuts for the wealthiest Americans must end, U.S. Treasury Secretary Timothy Geithner uttered on Wednesday.

Striking a note of austerity in prepared remarks to a meeting for consultation, Geithner said extending tax cuts for those making over $250,000 a year resoluteness only add to deficits.

‘Borrowing to finance tax cuts for the head two percent would be a $700-billion fiscal mistake,’ he said in speech, excerpts released by the U.S. Treasury ahead of the consequence sponsored by the Center for American Progress and the American Action Forum. ‘It’s not the prescription the economy needs now, and the country can’t afford it.’

Ahead of November’s U.S. congressional elections, President Barack Obama’s Democratic faction is struggling to maintain its support as the economic recovery slows and unemployment remains high.

Tax cuts enacted during the Bush president and cabinet are scheduled to expire at the end of this year and are a high-flavored button political issue. Republicans have ramped up their rhetoric in late days. They accuse Democrats of jeopardizing the economy if all the censure cuts are are not extended.

Obama and most Democrats want to diffuse them for individuals making less than $200,000, or families earning smaller than $250,000 – about 97 percent of all Americans.

Republicans and a sprinkling of Democrats have been making a case for extending them without ceasing grounds that not doing so would effectively mean a tax increase that might further hobble a soft recovery from recession.

‘We front forward to the debate about raising taxes in the middle of a recession,’ Senate Republican chief Mitch McConnell said on Tuesday.

Congress must take action to stretch out any part of the tax cuts. Dividend rates will rise from 15 percent to 40 percent by no action, a key source of stress among investors.

Separately, a superficies Treasury official said the department is assuming that Congress will give leave to tax cuts for the wealthiest Americans expire at year-end and that it decree take in billions of dollars more.

Mary Miller, assistant secretary because of financial markets, told a press conference that current borrowing plans take up beforehand the Bush administration’s cuts for those earning over $250,000 direct end.

‘FALSE PROSPERITY’

Geithner harked back to the former Clinton the government’s record of posting surpluses in the late 1990s, contrasting it through the succeeding Bush administration that he said ran up huge debts, and caused Americans’ incomes to stagnate with few jobs created.

‘We are living today with the mar that misguided policy caused,’ Geithner said, adding that country needed to make choice of a new course.

‘Rather than recreating a false prosperity fueled ~ means of debt and passing the bills on to the next generation, we want to restore America to a pro-growth tax and fiscal management,’ he said.

It was Geithner’s second major address of the week. On Monday he urged Wall Street’s bombastic banks to step up and make more loans and pledging not to collect new rules on top of old during the implementation of a financial regulatory overhaul.

Global investors are closely monitoring U.S. efforts to restrain in budget deficits for fear that failing to do so main hurt the country’s ability to keep borrowing and to enlarge output.

Geithner said on Tuesday in an New York Times editorial that the U.S. thriftiness was healing but conceded it ‘has a long way to rush before reaching its full potential.’

He also said the effects of the mysterious recession that followed the 2007-2009 financial crisis were a prolonged burden that needed to be dealt with in order to snag more vigorous growth.

‘We have a long way to go to art the fiscal trauma and damage across the country, and we last ~ and testament need to monitor the ups and downs in the economy month by month,’ Geithner wrote.

(Editing by Andrew Hay) Keywords: USA TREASURY/GEITHNER

(glenn.somerville@thomsonreuters.com; +1-202-898-8377; Reuters Messaging: glenn.somerville.reuters.com@reuters.toil)

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